Lord Turnbull: My Lords, I congratulate the noble Baroness, Lady Hayter, on promoting this debate, which is both timely and important. It is a pleasure to have something meaningful to get one’s teeth into.
I start by declaring an interest. The CMA is working on two initiatives. First, it is addressing its purpose and what powers it has. These were the subject of the letter from the noble Lord, Lord Tyrie, of 21 February to the Secretary of State in BEIS and are today’s main focus. Secondly, and more mundanely, it is examining whether the barrage of central control regimes that apply to it on pay, promotion, recruitment, appointments, finance, procurement et cetera are optimal for the tasks it faces. I am advising the CMA on this strand. It is work in progress and I have nothing further to add at this stage.
When I saw that the noble Baroness, Lady Hayter, was opening the debate, I wondered which noble Baroness was going to turn up. Would it be the noble Baroness with a long track record in consumer protection, or would she follow the line of the Labour leadership in the other place, seeking greater freedom for the Government to intervene, to back winners—or, more likely, prop up losers—and to respond to lobbying on mergers? I should not have doubted this, actually; I think I knew the answer. I am delighted that she has stayed true to her consumerist instincts and is backing the pro-competition, pro-consumer agenda.
The current competition regime is based on two remarkable Acts: the Competition Act 1998 and the Enterprise Act 2002. The driving force behind both was a Labour Chancellor, Gordon Brown. These Acts embody three principles. First, within the framework set by statute and consistent with the strategic steer provided by the Secretary of State, the CMA should be able to act independently of Ministers. There is an obvious read-across here from the operational independence of the Bank of England. Secondly, decisions should be based on evidence of economic impact on companies, consumers and suppliers, and not be driven by lobbying or ministerial whim. Thirdly, the regime should be stable and predictable.
The proposals set forward by the noble Lord, Lord Tyrie, in his letter do not seek to overturn these principles. They do quite the opposite: they seek to entrench—I think Gordon Brown would have used the phrase “lock in”; that was always his favourite expression —these principles, develop them and make them more effective in practice. These proposals are entirely consistent with the strategic steer that the then Secretary of State for BEIS, Sajid Javid, set out in a letter to the CMA in 2015. In that letter he said:
“We want the CMA to examine markets, new and existing, freely and fearlessly to see how competition can be improved … this Strategic Steer gives the CMA a clear mandate to help government design policy interventions and, when necessary, actively challenge any government rules and regulations if they consider they are negatively affecting competition … The Government is clear that the CMA should remain a strong, independent competition authority”.
I think all those principles remain.
It is natural that a new chair coming in will want to look at the fundamental purposes of the organisation. He has just joined. This is doubly important when it is likely that Brexit will take place in one form or another. In addition to its existing responsibilities, the CMA will take on more and more complex cases for mergers and antitrust enforcements, currently handled in Brussels.
Next, the CMA will become the enforcer of state aid regulations. This will, on occasion, put it head to head with other public authorities, making it more necessary than ever to safeguard its operational independence. Then there is the Furman review, which proposed a new digital markets unit, since it is in the digital space that many of the most pressing issues of consumer protection arise. It could be located within the CMA.
The CMA’s proposals should be examined constructively and I shall highlight some of them. First, there is the placing of an overriding consumer interest duty on the CMA in the courts. The way the current duty is framed can leave the CMA restrained from acting to protect consumers’ interests, unless they are doing so through purely competition-based remedies. This leads logically to the next proposal: to revisit the distinction between phase 1, which is market studies, and phase 2, which is market interventions. The scope of these two phases is different. A market study can identify a consumer detriment, but a subsequent market intervention must clearly address adverse effects on competition before action can be taken. For example, there could be a fully competitive market with no dominant players, though some players within it may adopt practices detrimental to consumers or suppliers. In that case, the CMA’s powers of enforcement are weak, so the right approach may well be to remove the distinction between market studies and market interventions.
Next, the CMA is seeking greater enforcement powers. Where it concludes that consumer law has been breached, it has no powers to order a cessation of illegal practices but must first pursue businesses through the courts to obtain binding remedies. Then there is the issue of individual responsibility. At present, competition law enforcement can result in a fine on a firm, but these fines do not necessarily have any impact on the individuals running those firms. By contrast, the Financial Conduct Authority can impose fines and other sanctions on regulated individuals.
Finally, there are proposals about the fees charged for examining merger proposals. Large companies can spend millions—tens of millions—on an army of advisers, which indicates just how much money they think they will make from these proposals. However, the CMA may charge only a little over £100,000. This is a nonsense. The CMA should be able to recover the full costs of the actions it takes and the effort it puts into examining these mergers. That money should be retained by the CMA and not sent to the Treasury, nor should the Treasury retain any of the fines.
I hope these ideas will be taken forward urgently and constructively. Some will require legislation. However, when the Commons adjourns at 4 pm after considering Kew Gardens leases, the excuse that there is no legislative time is pretty thin. The competition regime in the UK has many excellent features, but there are those in politics today who wish to turn the clock back, to bring Ministers and politicians more into the process. I hope that rather going backwards, we will use the CMA’s proposals to move forward, as the noble Baroness, Lady Hayter, has urged. I hope this will be done to enable the CMA to respond more quickly to problems that it identifies.